In the last episode of the “Unchained” podcast, Laura Shin spoke with Anderson Kill’s partner lawyers Stephen Palley and BSV Law’s partner Gabriel Shapiro about the SEC’s lawsuit against Ripple Labs and its founders.
First, both lawyers agreed that the “level of terror” of the case was different from similar cases.
As it is known, the US Securities and Exchange Commission (SEC) also sued the founders for the first time. In previous securities cases by the SEC against Kik and Telegram, neither founder Ted Livingston nor Durov brothers faced any lawsuits from the SEC. In the Brad Garlinghouse and Chris Larson case, Palley thinks the SEC filed a lawsuit against them for “making $ 600 million”. So if the SEC is trying to “get the money back” to distribute it to smaller investors, the two founders must take their funds.
On the other hand, the SEC refrained from suing Ripple for “fraud”, such as withholding information from investors or insider trading, but that could be a conceivable scenario. In this context, Shapiro stated that this would only complicate the case:
“There was a possibility of filing a fraud case. It would just be a lot more difficult. […] Why make the water cloudy by making a weaker claim although not necessarily? “
Both lawyers agreed that there is some “information inequality” between Ripple and the public. Gabriel Shapiro stated that if Ripple were a public company, Garlinghouse and Larsen would have to submit their sales to the SEC in Section 16 (b) to be transparent to the public. Shapiro also said:
“With all these protections that a typical investor would have in a typical security, XRP holders were deprived. So if XRP is a security, without that kind of explanation, you can see how they lost relatively speaking. ”
Palley added that Ripple knew that they had been under investigation for the past two years, but the public did not. Shapiro also recalled a study by the University of Bern that classified the XRP ledger as central. According to the crypto lawyer, almost every node on the Ripple Unique Node List (UNL) was paid by the company:
“There is only one node that claims to be independent.”
Another issue that opposes the Ripple victory, according to Shapiro, is that the judge presiding over the case against Kik was not persuaded by the argument that KIN was the currency. Hence, based on the circumstances, Palley claims the case is unlikely to go to the Supreme Court. A deal seems likely, according to Palley.
“I think the case must eventually be resolved. I don’t think you will go to the Supreme Court. If they take it as far as the Ninth Chamber of Appeals Court, they will likely lose. […] If I were to file a lawsuit to change the law and change the way we view digital assets, that wouldn’t be it. ”